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How Warren Buffet Is Floating His Way To An Even Richer Future And How You Can Too

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Warren Buffett, owner of the holding company Berkshire Hathaway, is our country’s most successful and celebrated investor.

As you can imagine, it takes a certain amount of insight, courage, and knowledge to reach the heights of success that he has. One of the ways he’s been so successful is by shunning conventionally accepted interpretations of investing and accounting and, instead, looking at the math of a situation and capitalizing on the story it tells.

You see, insurance companies routinely collect premiums, yet they don’t always pay these premiums out in claims immediately since most claims are made far into the future. To capitalize on the time lag between the date they collect premiums and the far future date they have to pay claims, insurance companies invest the premium dollars and earn interest.

Float has been such a significant wealth warehouse for Buffett that he used the specific term forty-six times in his 2015 letter to shareholders of Berkshire Hathaway. And that’s not the first time he’s mentioned it. Here’s what he said about float in his 2014 letter:

So how does our float affect intrinsic value? When Berkshire’s book value is calculated, the full amount of our float is deducted as a liability, just as if we had to pay it out tomorrow and could not replenish it. But to think of float as strictly a liability is incorrect; it should instead be viewed as a revolving fund.

As Buffett tells us, accountants have to look at float as a liability since it may eventually be paid out in claims. But for him—and for us—it’s possible to continue to collect interest on that money.

You and I may not be on Warren Buffett’s level, but we can still profit from understanding how actuaries price different types of insurance products so that we can get a greater return, significantly reduce risk, and achieve a lower tax liability.

If Buffett has such enthusiasm for this opportunity, those of us who are motivated by getting the most out of our hard-earned money should be too. Because it’s not an opportunity that’s out of reach, as long as you take the time to learn how to integrate the Strategic Movement Around Retirement Taxation® planning process into your financial plan.